FTSE bounces back

Talk of a concerted move to beef up balance sheets of struggling European banks today brought some respite to a battered London market.

The FTSE 100 Index closed up over 3% or 157.7 points at 5102.1, following five days of declines, amid reports European finance leaders were considering a recapitalisation plan for the region's banks.

Wall Street's Dow Jones Industrial Average also added to yesterday's late gains after better than expected service sector data on the other side of the Atlantic.

A rumoured EU move to shore up banks' finances was given further credence after Germany's chancellor Angela Merkel said she would back such an approach if it was deemed necessary.

The proposal comes amid increasing signs the eurozone debt crisis is spreading through the banking system, after Germany's Deutsche Bank issued a profits warning and Belgian lender Dexia buckles under the strain of exposure to Greek debt.

The improved session for London's top flight index came despite official figures revealing growth in the UK in 2011 was worse than previously thought. GDP for the second quarter was revised down to 0.1% from 0.2% and down to 0.4% from 0.5% for the first three months.

The pound eased to 1.159 against the euro on the disappointing GDP data and to 1.542 versus the US dollar.

Elsewhere, the retail sector prevented further gains after profit warnings from children's retailer Mothercare and airline Flybe.

Banks led the market higher today, with Royal Bank of Scotland 1.1p higher at 22.6p, Lloyds Banking Group up 1.2p at 33p and Barclays ahead 11.1p at 155.5p.

However, some analysts warned the rally was not likely to last as the wider problems swamping the eurozone showed no signs of abating.

Greek civil servants went on a 24-hour strike in a protest over deeper austerity measures as the government struggles to avoid a potentially catastrophic default and Italy's credit rating was downgraded.

In the supermarket sector, Sainsbury's appeared to have won the head-to-head battle with Tesco after reporting better-than-expected like-for-like sales growth of 1.9% for the second quarter.

However, both supermarkets enjoyed a lift to their share price, with Sainsbury's up 9.9p at 284.6p and Tesco advancing 13.2p at 393.3p.

Elsewhere, shares in fashion retailer SuperGroup slumped 30% after it warned teething problems with a new warehouse system could cost it as much as £9m (€10.42m). The stock dropped 298p to 707p.

Mothercare added to the woes for second line retailers after warning UK like-for-like sales were down 9.6% in the 12 weeks to October 1, sending its shares crashing by 42%, or 130p, to 180p.

Airline Flybe was another casualty after it revealed bookings had slowed significantly in September. Shares dived 36.5p to 65p.

The biggest Footsie risers were Vedanta up 81p at 1029p, Wolseley ahead 124p at 1640p, Barclays up 11.1p at 155.5p and Aviva ahead 20.3p at 295.6p.

The biggest Footsie fallers were Inmarsat down 28.5p at 444.9p, Next off 57p at 2447p, Kingfisher down 5.1p at 234.9p and Marks and Spencer off 4p at 308.8p.